What Credit Score is Needed to Buy a Home?

Buying a home is one of the biggest investments you can make in your lifetime. And, as with any investment, you must be financially prepared. One of the most important factors lenders consider before approving a loan is your credit score. So what credit score do you need to buy a home? Let's take a look. 

Minimum Credit Score for Mortgage Approval 

The minimum credit score for an FHA loan—a form of mortgage insured by the Federal Housing Administration—is 500. However, if you’re trying to get approved for more traditional types of mortgages, you should aim for at least 620 or better. A higher credit score will give you access to lower interest rates and potentially bigger loan amounts. It also signals to lenders that you are more likely to pay back the loan on time and in full. 

Besides FICO scores (which range from 300-850), some lenders may also consider other data points such as your payment history and debt-to-income ratio (DTI). This is the amount of debt relative to income that determines how easily you can handle your monthly expenses, including any potential mortgage payments. Lenders usually like to see DTIs below 43%. You may still be able to qualify for a loan with higher DTIs but it may come with higher interest rates or other restrictions on the loan terms. 
                                                                                               
Boosting Your Credit Score 

If your credit score isn’t quite high enough yet, there are several steps you can take to increase it quickly and efficiently. First, check your credit report for any errors or inaccuracies that could be dragging down your score unfairly. Then, focus on paying off outstanding debts while maintaining timely payments on all current loans and bills each month going forward. Additionally, keep balances low on revolving accounts like credit cards - ideally around 30% or less than their total limits - so that they don’t start having too much negative impact on your overall score. Finally, try not to open new lines of credit unless absolutely necessary until after your mortgage has been approved (opening new accounts can temporarily reduce your score). 

Final Thoughts

Your credit score plays a major role when it comes time for lenders to decide whether or not they will approve a mortgage loan application. The minimum accepted FICO score is 500 but most traditional lenders prefer scores of at least 620 or higher before they will weigh in with an approval decision. If yours isn't quite high enough yet, there are steps you can take right now to boost it up quickly so that when house-hunting season rolls around again, you’ll find yourself one step closer towards owning a home!

To get pre approved to purchase a home start by filling out an application https://www.blink.mortgage/app/signup/p/edgehomefinancecorporation/noworytagutierrez

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